Several influential OPEC members, including…
China will soon be opening…
The leadership shakeup by Saudi King Salman bin Abdulaziz al-Saud completely changed the kingdom's line of succession, bringing in younger heirs and abandoning the practice of reserving the throne for sons of the kingdom’s founder.
But one man whose job is safe is Ali al-Naimi, the minister of petroleum and mineral resources, an indication that while blood may be thicker than water in most societies, in the Saudi kingdom oil may be thicker than blood.
A brief look at the new leadership lineup announced April 29 in Saudi Arabia, the world’s most copious oil producer, shows that King Salman replaced the crown prince, his elderly half-brother Prince Muqrin, with the younger Mohammed bin Nayef al-Saud, Salman’s nephew. Salman’s son, the young Defense Minister Mohammed bin Salaman, was elevated to deputy crown prince, second in line to the throne.
Related: Oil, The Fed And The Ugly Truth About Capital Markets
This was a break from Saudi tradition. Until now, the line of succession always had included the sons of King Abdul-Aziz Al Saud, who founded the kingdom in in 1932 and died in 1953. The reason is the age and, in many cases, the poor health of the heirs who may not be up to the challenge of ruling the kingdom in the 21st century.
Salman, 79, became king on January 23 upon the death of his half-brother, King Abdullah. At the time, Saudi Arabia faced rare challenges ranging from a rise in Islamic extremism in the Middle East, including neighboring Yemen, and the price of oil, the country’s chief commodity, which has been at a record low.
Related: HSBC Advises Clients To Get Out Of Fossil Fuels
But despite his own advanced age of 79, al-Naimi was spared. Having served as the kingdom’s oil minister since 1995, he’s widely viewed as the mastermind behind OPEC’s decision in November not to cut oil production below its current level of 30 million barrels a day, which would have reduced supply and bolstered prices that had been plunging since late June 2014.
That decision, reached over the objections of needier countries in the 12-member cartel, began a price war with independent producers who had been ramping up production and intruding on OPEC’s market share. Most notable was the United States, whose production of shale oil was shifting the country’s status from the cartel’s biggest customer towards a major competitor.
Related: Why The US Should Worry About Oil Sector Jobs
But US producers relied heavily on hydraulic fracturing, or fracking, a relatively expensive way to extract oil and other energy from underground shale formations. Al-Naimi’s strategy of keeping prices low was meant to make fracking for shale oil unprofitable and help OPEC regain lost market share. That approach has been showing some signs of success lately.
This policy is a shift from Saudi Arabia’s traditional role as a swing producer, a country with enough flexibility – and oil – that strives to adjust output to maintain prices that are both attractive to customers and lucrative for producers. Al-Naimi’s survival is a signal that King Salman is satisfied with his country’s new oil policy.
At least that’s the view of Clement M. Henry, a professor at the Middle East Institute of the National University of Singapore. “I don’t think there’s been any disagreement [within the Saudi leadership] about the idea of keeping up production, maintaining market share, refusing to be a swing producer,” he told Reuters.
By Andy Tully of Oilprice.com
More Top Reads From Oilprice.com:
Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com